Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : EDS - Recent pullback a buy opportunity??? -- Ignore unavailable to you. Want to Upgrade?

To: Daniel Liberty who wrote (1353)	2/5/1999 3:55:00 PM
From: Anthony Wong	Respond to of 1841

EDS Falls After Xerox Dispute Trims 4th-Qtr Sales (Update1) Bloomberg News February 5, 1999, 3:01 p.m. ET EDS Falls After Xerox Dispute Trims 4th-Qtr Sales (Update1) (Updates share activity in first 2 paragraphs.) Plano, Texas, Feb. 5 (Bloomberg) -- Electronic Data Systems Corp. shares fell as much as 13 percent after the second-biggest U.S. computer services company said a legal dispute with Xerox Corp. shaved fourth-quarter revenue by $200 million. The shares fell 5 15/16 to 46 1/16 in midafternoon trading of 2.41 million. Earlier, they touched 45 1/2. The lawsuit and concern about slowing sales growth spooked investors who had expected EDS to begin turning around after a year of lower profits, analysts said. Before today, EDS shares climbed 28 percent since Dec. 10, largely on anticipation that new Chairman and Chief Executive Richard Brown will wring more profits out of contracts to manage other companies' computers. ''The stock may have gotten a little ahead of itself with Mr. Brown,'' said Doug Johanson, a portfolio manager with IMS Capital Management in Clackamas, Oregon, which owns about 65,000 EDS shares. Brown's predecessor, Les Alberthal, resigned in August, and concern about the company's leadership damped contract signings. Plano, Texas-based EDS booked $2.5 billion in new business during the quarter, short of the $3.6 billion forecast by Prudential Securities analyst Thomas Browne. ''The recent turmoil at the top of the house has affected EDS's new-business sales performance,'' said Robert Djurdjevic, president of Annex Research in Phoenix. EDS sued Xerox in New York State Court yesterday after a year of negotiations failed to resolve issues related to EDS's $3.2 billion, 10-year contract to manage Xerox's computer system, EDS Vice President Myrna Vance said. The legal dispute reduced fourth-quarter revenue by $200 million, EDS said when it reported earnings after the close of markets yesterday. EDS is meeting its obligations under the contract signed in 1994, Vance said. In its lawsuit, EDS seeks to recover more than $200 million from Xerox, she said. Vance provided few other details of the litigation, citing a confidentiality agreement. Xerox spokesman Jeff Simek said the company intends to contest EDS's claims. EDS last sued a customer in 1992, when it squared off with the state of Florida over a contract to consolidate computer systems for the state's health department. The two sides resolved the dispute through mediation in 1995. --Loren Steffy in Dallas (214) 855-5103 through the Princeton

To: Daniel Liberty who wrote (1353)	2/5/1999 8:07:00 PM
From: Dave O.	Read Replies (2) \| Respond to of 1841

Dan, Here's my thoughts. In the early days GM was great for EDS, explosive growth, very generous margins and a monster customer. Now that "monster" is coming back to haunt EDS to some degree. GM revenues are expected to decline 7-10% in 1999 and margins have been getting squeezed as well. And GM is still such a big chunk of overall business. And with concensus estimates at $2.22 it's trading at a P/E of 22. The 9% growth (if you include the Xerox disputed $200 million) won't likely be able to support that kind of multiple. Also, I saw that operating margins in Q4 declined from 11.1% to 8.9%. Last, the stock has been on a tear ... I think it was around 36 when they announced Brown as the new CEO. Dave